personal finance - chapter 2

True

A budget says what will happen with your money, while a cash-flow statement shows what already happened.

gives you permission to spend.

A common misconception is that budgeting will keep you from having fun, when really it...

track

After you make a budget, you need to _________ every expense.

sales made

Commission is when you make money based off the percentage of ___________.

True

Detailed categories on your budget will help you make better spending decisions.

A fixed expense continually remains the same amount month to month (Ex. Rent Payment). The amount of a variable expense varies month to month (Ex. Utilities).

Explain the difference between a fixed expense and a variable expense. Include an example of each.

A discretionary expense is a nonessential expense (Ex. eating out at a restaurant or going to the movies). An intermittent expense is an expense that occurs at various times throughout the year and tends to be in large, lump sums (Ex. car insurance premium)

Explain the differences between a discretionary expense and an intermittent expense. Give an example of each.

An irregular income is defined as an income that comes in at different amounts or at different times, or both (Ex. Realtors, Summer Mowing Business, Baking Side Hustle)

Explain what an irregular income is & give two examples.

As many as you need?

How many categories should you have in your budget?

3 months

How many months does it usually take for your budget to start working as a budget should?

False

If you get married, only one person is responsible for budgeting.

False

If you have an irregular income, budgeting won't work for you.

a. Food, Utilities, Shelter, & Transportation b. The Four Walls come immediately after your giving and saving categories.

List the 4 walls. What priority are those in your budget?

15%

Looking towards the future, when you have no debt other than mortgage, how much should you budget for retirement?

miscellaneous

Make sure you always have a ___________ category within your budget.

False

Net income is the amount you get paid before taxes.

False?

Online budgeting apps are more effective than budgeting with pen and paper.

personal debt

Research shows nearly half (46%) of Americans feel stress and anxiety about the amount of ________ they have.

False

Savers don't like the idea of creating a budget.

True

Spenders need convincing that budgeting is a good idea.

giving

The first priority in your budget should be ________.

True

The primary reason people don't budget is because they lack the behavior to stick to a budget.

schedule a time every month to work on the next month's budget

To help you get into the habit of budgeting, it helps to...

1. Food 2. Utilities 3. Shelter 4. Transportation

What are the 4 walls?

income, giving, saving, and spending

What are the components of a budget?

A budget shows you what your income in and what your expenses are for a set period of time.

What does a budget show you?

First, you go to the bank (weekly or monthly) and get some cash. Put the amount of cash you've budgeted for each category in its own envelope labeled with the category's name. Any time you buy something from a category, just use the cash from its envelope.

What is the envelope system?

The first priority of your budget should be giving. When you approach your money in a spirit of generosity, you're more grateful and content with what you have. Contentment naturally leads your to serve and help others.

What is the first priority in your budget? What is the importance of this step?

money coming in (paycheck, gifts, etc.)

What kind of money counts as income?

You have achieved a zero-based budget when you have assigned an expense to every dollar of your income.

What makes a budget a zero-based budget?

35%

What percentage of Americans actually use a budget?

discretionary expense

What type of expense is going to the movies?

cash

When you use __________, you end up spending less.

attitude towards budgeting

Your money personality can affect your __________.

False

Your monthly rent payment is an example of a variable expense.

cash flow statement

a record that summarizes all of the income and outgo (spending) over a certain time period

budget

a written plan for giving, saving, and spending

zero-based budget

cash-flow plan that assigns an expense to every dollar of your income; the goal is for the total income minus the total expense to equal zero

commission

earnings based on a percentage of the sales made

discretionary expense

expense for things you don't need

intermittent expense

expense that occurs at various times throughout the year and tends to be in large, lump sums

fixed expense

expense that remains the same from month to month

variable expense

expense that varies in dollar amount from month to month, but that you can expect to have every month

irregular income

income that comes in at different amounts or at different times, or both

income

money received for work, as a gift, or through investments

gross income

the amount you earn before taxes and other payroll deductions

net income

what a person earns after payroll taxes and other deductions are taken out; often referred to as take-home pay